Financial Wellness Wednesday - Student Loans

 

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Student Loans

Student loans could be from recently graduating or from 10 or more years ago. Either way, they must be paid and there is rarely any forgiveness for them and bankruptcy can not make them go away.

We have to face the facts that we must pay them off and pay them off as quickly as possible. It will take time, but stick with it. The interest adds up really fast.

Step 1: Make a monthly budget, if you don't have one . Identify things that are only wants and not really needs, like going out to eat, cable TV, clothes that you don't really need. Stop using your money for wants and apply them to your student loans as extra payments.

Step 2: If you have more than one loan, pay the minimum on all except the lowest balance one. The lowest balance loan, attack it. Pay more than the minimum amount with the money you identified in Step 1. Pay as much extra as you can until it is paid off. Then apply all of the monthly amount you were paying on the loan just paid off, PLUS the minimum on the next lowest balance loan until you pay that one off.  And keep going until they are all paid off.

For example:

Student Loan #1 balance $1,500; minimum payment $150/mo. Extra payment $50/month. Total monthly payment = $200/month. Once paid off, apply the full $200 to Loan #2.

Student Loan #2 balance $2,500; minimum payment $180/month. After Loan #1 is paid in full, apply the full $200/month you were paying on #1 to #2 loan. Total monthly payment after #1 is paid in full = $380. Once paid off, apply the full $380 to Loan #3.

And so on, until you are student loan free!!

You can do this. You need to do this. These are not going anywhere and will continue to grow with interest accruing. Some lenders will take your tax refunds or put liens on your bank accounts. It is serious. Don't ignore it. (By the way, if you get a tax refund, use it all to pay down your balance).

It is so worth it. Think of the things you could be doing with those payments. Paying off your car or house or saving for a down payment on a house, and giving generously.

You can master your money... and I can help!  

Contact Michelle Serna by filling out the Contact Me form to the right of this post.